Merck Introduces New Strategy: BioVentures

While some big pharma companies are in the midst of buying up biotech firms, Merck decided that it could to the job itself, announcing on Tuesday that it will establish a biologics division called Merck BioVentures.

The new biotech division will take advantage of the GlycoFi technology that Merck purchased in 2006 for $400 million. Glycoengineering allows scientists to produce proteins using yeast. The company is currently working on a follow-on version of Amgen’s anemia drug Epogen, and expects to have about five additional candidates in Phase III trials by 2012. To make sure everything goes smoothly, Merck plans to put $1.5 billion into the division by 2015.

“Merck BioVentures is uniquely positioned for success as a result of the humanized GlycoFi yeast platform, which has the potential to provide us with a competitive advantage at a time when the patents on many marketed biologic therapeutics are set to expire,” said Peter Kim, executive vice president and president of Merck Research Laboratories.

Outlook Down
This news comes less than a week after the company announced that it would be lowering its 2009 outlook in the midst of a huge restructuring plan and an economic downturn. Last Thursday, Merck CEO Richard Clark told investors that it was downgrading its outlook for 2009 to between $3.15 and $3.30 per share.

The company expects to see two new candidates for migraine and acute heart failure in 2009, and plans to continue pushing Januvia despite the potential for competition. Meanwhile, Merck’s blockbuster HPV vaccine Gardasil might see a decline in first dose vaccines because it’s running out of people to vaccinate. The company said it might be difficult to penetrate the remaining non-users. Rather, the plan is to seek approval to raise the age limit that women can be vaccinated, and receive approval to vaccinate men.

“While we expect weakness in Merck’s shares because the ‘miss’ relative to expectations, the operating components of the P&L are largely in line. Hence, we view this weakness as a buying opportunity,” Deutsch Bank analyst Barbara Ryan said in a statement last Friday.

One of the topics not brought up was the possibility of further layoffs. Merck has cut approximately 7,200 positions in preparation for patent expirations. “We are focusing our resources on the highest value activities, while outsourcing more transactional work,” Clark said Tuesday. “We are also bringing in new talent with the new skills and expertise we need to complement the strong talent and experience we already have. And we will continue to invest in developing the strong leaders we need to carry out our plans.”